Invested Assets

9 Months Ended

Sep. 30, 2013

Text Block [Abstract]

Invested Assets

2) Invested Assets

(a) The amortized cost and fair value of fixed maturities and equity securities were as follows:

	September 30, 2013
	Amortized Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Fair Value
	(in millions)
Fixed maturities
Tax exempt	$	18,210	$	905	$	164	$	18,951
Taxable
U.S. government and government agency and authority obligations		790		35		7		818
Corporate bonds		8,838		399		77		9,160
Foreign government and government agency obligations		6,773		238		24		6,987
Residential mortgage-backed securities		302		23		1		324
Commercial mortgage-backed securities		1,333		39		2		1,370
		18,036		734		111		18,659
Total fixed maturities	$	36,246	$	1,639	$	275	$	37,610
Equity securities	$	1,163	$	665	$	7	$	1,821

	December 31, 2012
	Amortized Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation		Fair Value
	(in millions)
Fixed maturities
Tax exempt	$	18,410	$	1,522	$	19	$	19,913
Taxable
U.S. government and government agency and authority obligations		973		66		—		1,039
Corporate bonds		7,331		609		3		7,937
Foreign government and government agency obligations		6,614		395		1		7,008
Residential mortgage-backed securities		421		36		2		455
Commercial mortgage-backed securities		1,649		76		1		1,724
		16,988		1,182		7		18,163
Total fixed maturities	$	35,398	$	2,704	$	26	$	38,076
Equity securities	$	1,244	$	453	$	34	$	1,663

The fair value and amortized cost of fixed maturities at September 30, 2013 by contractual maturity were as follows:

	Fair Value		Amortized Cost
	(in millions)
Due in one year or less	$	2,180	$	2,149
Due after one year through five years		14,165		13,581
Due after five years through ten years		11,717		11,148
Due after ten years		7,854		7,733
		35,916		34,611
Residential mortgage-backed securities		324		302
Commercial mortgage-backed securities		1,370		1,333
	$	37,610	$	36,246

Actual maturities could differ from contractual maturities because borrowers may have the right to call or prepay obligations.

The Corporation’s equity securities comprise a diversified portfolio of primarily U.S. publicly-traded common stocks.

The Corporation is involved in the normal course of business with variable interest entities (VIEs) primarily as a passive investor in residential mortgage-backed securities, commercial mortgage-backed securities and private equity limited partnerships issued by third party VIEs. The Corporation is not the primary beneficiary of these VIEs. The Corporation’s maximum exposure to loss with respect to these investments is limited to the investment carrying values included in the Corporation’s consolidated balance sheet and any unfunded partnership commitments.

(b) The components of unrealized appreciation or depreciation, including unrealized other-than-temporary impairment losses, of investments carried at fair value were as follows:

	September 30 2013		December 31 2012
	(in millions)
Fixed maturities
Gross unrealized appreciation	$	1,639	$	2,704
Gross unrealized depreciation		275		26
		1,364		2,678
Equity securities
Gross unrealized appreciation		665		453
Gross unrealized depreciation		7		34
		658		419
		2,022		3,097
Deferred income tax liability		708		1,084
	$	1,314	$	2,013

The following table summarizes, for all investment securities in an unrealized loss position at September 30, 2013, the aggregate fair value and gross unrealized depreciation, including unrealized other-than-temporary impairment losses, by investment category and length of time that individual securities have continuously been in an unrealized loss position.

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation
	(in millions)
Fixed maturities
Tax exempt	$	2,900	$	145	$	128	$	19	$	3,028	$	164
Taxable
U.S. government and government agency and authority obligations		139		3		34		4		173		7
Corporate bonds		2,512		75		42		2		2,554		77
Foreign government and government agency obligations		1,519		22		36		2		1,555		24
Residential mortgage-backed securities		3		—		15		1		18		1
Commercial mortgage-backed securities		94		2		16		—		110		2
		4,267		102		143		9		4,410		111
Total fixed maturities		7,167		247		271		28		7,438		275
Equity securities		45		4		11		3		56		7
	$	7,212	$	251	$	282	$	31	$	7,494	$	282

At September 30, 2013, approximately 1,090 individual fixed maturities and 10 individual equity securities were in an unrealized loss position. The Corporation does not have the intent to sell and it is not more likely than not that the Corporation will be required to sell these fixed maturities before the securities recover to their amortized cost value. In addition, the Corporation believes that none of the declines in the fair values of these fixed maturities relate to credit losses. The Corporation has the intent and ability to hold the equity securities in an unrealized loss position for a period of time sufficient to allow for the recovery of cost. The Corporation believes that none of the declines in the fair value of these fixed maturities and equity securities were other than temporary at September 30, 2013.

The following table summarizes, for all investment securities in an unrealized loss position at December 31, 2012, the aggregate fair value and gross unrealized depreciation, including unrealized other-than-temporary impairment losses, by investment category and length of time that individual securities have continuously been in an unrealized loss position.

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation		Fair Value		Gross Unrealized Depreciation
	(in millions)
Fixed maturities
Tax exempt	$	344	$	6	$	104	$	13	$	448	$	19
Taxable
U.S. government and government agency and authority obligations		28		—		20		—		48		—
Corporate bonds		289		2		14		1		303		3
Foreign government and government agency obligations		429		1		13		—		442		1
Residential mortgage-backed securities		1		—		19		2		20		2
Commercial mortgage-backed securities		105		1		3		—		108		1
		852		4		69		3		921		7
Total fixed maturities		1,196		10		173		16		1,369		26
Equity securities		182		21		63		13		245		34
	$	1,378	$	31	$	236	$	29	$	1,614	$	60

The change in unrealized appreciation or depreciation of investments carried at fair value, including the change in unrealized other-than-temporary impairment losses, was as follows:

	Periods Ended September 30
	Third Quarter					Nine Months
	2013			2012		2013			2012
	(in millions)
Change in unrealized appreciation of fixed maturities	$	(99	)	$	295	$	(1,314	)	$	411
Change in unrealized appreciation of equity securities		94			57		239			131
		(5	)		352		(1,075	)		542
Deferred income tax (credit)		(2	)		123		(376	)		190
	$	(3	)	$	229	$	(699	)	$	352

(c) Realized investment gains and losses were as follows:

	Periods Ended September 30
	Third Quarter						Nine Months
	2013			2012			2013			2012
	(in millions)
Fixed maturities
Gross realized gains	$	17		$	35		$	44		$	97
Gross realized losses		(22	)		(8	)		(32	)		(18	)
Other-than-temporary impairment losses		(2	)		(2	)		(2	)		(4	)
		(7	)		25			10			75
Equity securities
Gross realized gains		5			25			179			50
Gross realized losses		(1	)		—			(1	)		—
Other-than-temporary impairment losses		(2	)		(5	)		(9	)		(40	)
		2			20			169			10
Other invested assets		23			(45	)		156			18
	$	18		$	—		$	335		$	103

(d) As of September 30, 2013 and December 31, 2012, fixed maturities still held by the Corporation for which a portion of their other-than-temporary impairment losses were recognized in other comprehensive income had cumulative credit-related losses of $20 million and $22 million, respectively, recognized in net income.